ConsumerWatch: Prepaid Cellphone Plans Can Pay Off For Individuals

Related Tags:

SAN FRANCISCO (CBS 5) — Paying-as-you go can pay off handsomely for some smartphone users. According to one estimate, some consumers could save as much as $1,000 over two years by opting for a prepaid or month-to-month plan, instead of a contract plan.

Aubrey Gates of San Francisco switched to a prepaid plan more than a year ago, and has already saved hundreds of dollars. “It’s been a great choice,” said Gates, who pays $56 a month for her unlimited plan with Metro PCS. According to the website MyRatePlan.com, the cost is about half what Gates would pay under a contract plan with AT&T or Sprint.

“No-contract plans are sometimes an overlooked option,” according to Jessica Dolcourt of CNET.

Dolcourt said the big cell phone companies don’t go out of their way to tell customers about prepaid plans because they’re less profitable. “The national carriers, they’re interested in signing up people for a contract,” she said.

According to Dolcourt, the smaller companies that offer prepaid plans don’t do a lot of advertising. “They don’t have the marketing budget,” she said.

Dolcourt said no-contract plans are best suited to individual users who don’t use tons of data. “But there’s a lot of math involved,” she warns.

Smartphone users must consider coverage and speed. “Some prepaid carriers are going to be faster than others, so you might find yourself on a carrier that has a much slower data network than you want for a smartphone,” Dolcourt says.

Another drawback to prepaid, you will have to buy your own phone, and the price could be two to three times more than contract customers pay. “Sometimes the price will shock people in the U.S. who are used to seeing subsidized prices,” Dolcourt said.

On the positive side: prepaid customers now have more phone choices than ever. Over the summer, several carriers began offering prepaid plans for Apple’s iPhone, and some big Android phones are now available through prepaid phone companies.

Should you switch? Dolcourt advises doing some homework first by comparing plans, something that can be done on websites like MyRatePlan and BillShrink. “There is no one size fits all. You really have to educate yourself,” she said.

(Copyright 2012 by CBS San Francisco. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)